Commercial Expert Advisors: The Pros and Cons

What Is A Commercial Expert Advisor?

Expert Advisors (EA’s) are a type of trading software written for the MetaTrader platform, written in the platforms programming language. Expert Advisors work alongside the MetaTrader platform and allows a trader to automate their trading. Commercial Expert Advisors are Expert Advisors that are available to purchase. Commercial EA’s are either sold for a one of payment or available through a monthly subscription service. Opinion on commercial Expert Advisors is divided with many traders steering well clear of any commercially available Expert Advisor, while some traders maintain they can be used profitably. Today, we are going to look at some of the pros and cons of using commercial expert advisors.

Pros

Install and Trade

The majority of commercial Expert Advisors come ready for immediate use, allowing a trader to simply install the Expert Advisor and trade away. This is why commercial Expert Advisors are very popular with novice traders who haven’t already developed their own approach to Forex trading.

Wide Selection of Commercial Expert Advisors

There is a huge selection of commercial Expert Advisors available for purchase. This means that there are Expert Advisors available that use a wide range of different trading strategies. For instance there are literally hundreds of different scalpers, news trading and longer term Expert Advisors available for purchase. This selection allows traders to find an Expert Advisor that is suitable for their needs.

Opportunity to Make Profit Automatically

By far the biggest selling point of commercial EA’s, is that they offer traders the possibility of making profits automatically. This obviously a huge draw and is part of the reason why so many people ultimately try out commercial Expert Advisor’s. The ability to make money with no effort is something that many people dream of, unfortunately only a very limited number of commercial advisors deliver on this promise.

Cons

Black box trading system

The majority of Expert Advisors are black box systems meaning that traders are unable to understand the internal workings of the system. Those responsible for programming the Expert Advisor are unable to share many significant details about the internal workings of the software, due to the fear that competitors would then copy their system. Trading with a black box system can be nerve wracking as it may be unclear why the system is taking on certain positions.

Backtest Optimized

Non-optimized Backtest results

Many commercial Expert Advisors cit impressive back test results in their sales material, however it is often the case that the Expert Advisor has been optimized to perform well in these historic tests. This can often lead to the Expert Advisor performing very differently from the cited historic performance, when used on a live real money account. While successful back tests are something to lookout for, back tests may not be a good indicator of how a system will perform in the future.

Poor Quality Systems

Many people believe that the majority of commercial Expert Advisors are poor quality systems. If you had a truly great trading system why would sell it to others? Surely you would trade the system yourself. One reasonable reply might be to say that you can earn a lot of money selling an Expert Advisor, possibly more than from trading the system if you only have a limited amount of capital. There have certainly been a number of systems that have performed well over a period of several years, though there seems to be an abundance of systems that perform rather poorly.

Trial and Error

Working out which systems are going to profitable and which systems are going to fail miserably can be particularly challenging. This often leads to traders buying a system to only find out that it doesn’t work with a real money account, losing a substantial amount of money in the meantime. Trial and error is not only limited to systems but also working out which settings and currency pairings the Expert Advisor works best with. All of this can make finding a good commercial setup a very costly process.

Concluding Thoughts

Commercial Expert Advisors get very mixed press with many traders treating such EA’s with great suspicion. This is with good reason, as it appears that the majority of commercial Expert Advisors ultimately fail. Commercial Expert Advisors which perform well in real accounts for an extended period of time are certainly in the minority. I would recommend great caution when dealing with commercial Expert Advisors. Those who are still interested in trying out commercial Expert Advisors, should make sure they do substantial research. I recommend traders check out forums such as Donna Forex where you will find discussion of many commercial Expert Advisors.